Digital markets and the new pro-competition regime

Digital markets have had huge positive effects for consumers and society; that much is not in doubt. They’ve transformed the way we’re able to keep in touch with friends and family, given us access to a vast range of products and services in hugely convenient ways and opened up new work opportunities for individuals and businesses. But as more of us are immersed in the digital economy, there are signs that the competitive engine has broken down. The commanding heights of the digital landscape have come to be dominated by a small group of tech giants. And that can lead to negative consequences for us all. Businesses and customers face higher prices when advertising and shopping online (see press release on Digital Advertising Market Study). Innovation is held back, with app developers and cloud gaming being restricted (See MEMS interim report). And big platforms hold huge bargaining power over the businesses and consumers that use them, allowing them to impose less favourable terms (see press release on platforms and publishers advice).

As well as imposing costs on consumers and businesses, these competition problems are imposing costs on society: for example, by facilitating the spread of abusive material and ‘fake news’ and restricting the revenues that flow to the media services that play such an important role in our democracy.

The DMU and the digital regime

Experts around the world, including the UK’s Furman Review in March 2019, have concluded that existing competition laws are not always well suited to solving the problems in fast-moving digital markets. A new pro-competition approach is needed to oversee the most powerful digital firms. Our advice set out a proposed blueprint for this new regime.

Our current powers are important, but they can be too slow for fast-moving digital markets, and are too focused on fixing problems, rather than preventing them before they arise. While they work well across the economy as a whole, they aren’t designed for some of the specific issues we see in digital markets today. 

The proposed DMU regime will provide a specially-designed toolkit for tackling these problems and ensuring that digital markets are competitive and innovative. It will set the rules of the game for the most powerful firms upfront. It will enable us to test and adapt pro-competitive remedies flexibly over time, learning from and responding to changes in the market. And it will help us to spot anti-competitive mergers and intervene quickly to prevent harm.

Today’s Queen’s Speech announced the government’s plans to publish a draft Bill including measures on competition in digital markets, and while this means a Bill won’t be introduced in the next Parliamentary session (2022 to 23), the government last week re-confirmed its intention to legislate as soon as Parliamentary time allows. We support the final proposals and will work with the government on the draft Bill and with Parliament and stakeholders to ensure it is given the scrutiny and debate it deserves.

Similarly, we are pleased that the government is also taking forward much-needed reforms to strengthen competition and consumer law more generally, as the harm that may be caused by algorithms (see algorithms paper) and digital design (see Online Choice Architecture paper) is not confined solely to a small number of the most powerful firms.

Current digital markets work

Ever since the government asked us to set up the DMU in shadow form, we have struck a balance between preparing for the full DMU role and taking action using our existing powers. Now that we have a clearer view of the timing of the digital markets legislation, we are revisiting that balance.

We are already using our existing tools in digital markets on many fronts: 

• Apple’s approach to app payments. 
• Meta’s use of data to compete with others’ services.
•  Meta and Google’s agreement in advertising markets
• Amazon and Google on fake online reviews
• Google’s planned removal of third party cookies from Chrome. We are overseeing these changes following commitments from Google.
• Meta’s acquisition of its potential competitor, Giphy, where our prohibition of this merger is under appeal.
•  Apple and Google in mobile markets
• Our music streaming market study

This portfolio will grow as we up our efforts to tackle problems in digital markets. There are some issues which the DMU powers will be better suited to addressing. However, where we think we can achieve results for consumers using our existing tools we will do so.

Our next steps

Since the shadow DMU was established in April 2021 we have made significant progress in building the knowledge, capability and skills we will need to oversee the new regime. This includes developing our horizon-scanning capability, working closely with the technical experts in our DaTA team, forming relationships with a wide range of key stakeholders, and leading or contributing to the range of CMA work already underway. We now have around 70 people working in the DMU and many more across the CMA working on digital issues under our existing powers. The DMU will continue to grow as the legislation progresses, and as we move to becoming fully operational.

Cooperation with other regulators, both in the UK and internationally, will also remain a big focus: last week the Digital Regulation Cooperation Forum (DRCF) published its workplan for the 2022 to 23 year. We will also keenly follow the progress of the Digital Markets Act (DMA) in the EU, because there are many links between the EU’s regime and the UK’s approach. Collaboration with other jurisdictions will be vital, and we will work to ensure actions firms take to comply with the obligations elsewhere result in good outcomes for UK consumers and businesses. The global commitments we secured from Google in relation to their Privacy Sandbox are a prime example of this.

Overall, competition in the digital economy is not working well enough for UK consumers and businesses. A new pro-competition regime is needed to preserve and enhance a dynamic and innovative tech sector in the UK. While legislation develops, we will continue to protect consumers and businesses with our existing CMA powers and will build capacity, capability and knowledge in the DMU to make sure we are well-placed to use the new powers when they arrive.